SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
COMMUNITY BANCORP.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date Filed:
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April, 2004
Dear Fellow Shareholders:
You are cordially invited to the Annual Meeting of the Shareholders
of Community Bancorp., which will be held at 5:30 P.M. at the Elks Club,
Derby, Vermont, on Tuesday, May 4, 2004. As in prior years, a dinner will
be served following the meeting.
I have enclosed our proxy materials and our Annual Report for 2003
for your review. I encourage you to sign, date and return your proxy card
promptly so that your shares will be represented and can be voted at the
meeting whether or not you are present in person. You may withdraw your
proxy and vote in person at the meeting if you choose to do so.
Thank you for your continued support of Community Bancorp. I look
forward to seeing you at the annual meeting.
Sincerely,
COMMUNITY BANCORP.
/s/ Richard C. White
Richard C. White
Chairman & CEO
RCW/cb
Enclosures
[LOGO] COMMUNITY BANCORP.
Derby Road
Route 5
Derby, Vermont 05829
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 4, 2004
The annual meeting of shareholders of Community Bancorp. will be held
at the Elks Club, Derby, Vermont, on Tuesday, May 4, 2004, at 5:30 p.m.,
for the following purposes:
1. To elect four directors to serve until the annual meeting of
Shareholders in 2007;
2. To ratify the selection of the independent public accounting
firm of Berry, Dunn, McNeil & Parker as the Company's external
auditor for the fiscal year ending December 31, 2004; and
3. To transact such other business as may properly be brought
before the meeting.
The close of business on March 9, 2004, has been fixed as the record
date for determining shareholders entitled to notice of, and to vote at,
the annual meeting.
By Order of the Board of Directors,
/s/ Chris Bumps
CHRIS BUMPS
Corporate Secretary
Derby, Vermont
April 1, 2004
YOUR PROXY IS ENCLOSED. PLEASE FILL IN, DATE, SIGN AND RETURN YOUR
PROXY PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE WHETHER OR NOT YOU
PLAN TO BE PRESENT AT THE MEETING. YOU MAY STILL VOTE IN PERSON IF YOU
ATTEND THE MEETING. IT IS IMPORTANT THAT YOU RETURN YOUR COMPLETED PROXY
PROMPTLY.
INDEX
PROXY STATEMENT 1
ANNUAL MEETING OF SHAREHOLDERS 1
GENERAL VOTING INFORMATION 1
Who is entitled to vote at the annual meeting? 1
How many votes do I have? 1
How do I vote? 1
Can I change my vote after submitting the proxy card? 1
How many shares are entitled to vote at the meeting? 2
What constitutes a quorum and how are votes counted for that purpose? 2
What are "broker non-votes" and how do they affect calculation of a
quorum or voting on any matter? 2
What does it mean if I received more than one proxy card? 2
How do I vote if my shares are held in the name of a broker or bank? 2
How are proxies being solicited and who pays the expenses? 2
How many votes are required for the election of directors? 3
How many votes are required to ratify the selection of Berry, Dunn,
McNeil & Parker as the Company's independent auditor? 3
How many votes are required to approve any other matter that
may come before the meeting? 3
May shareholders submit nominations for election as directors
or for consideration of other matters? 3
SHARE OWNERSHIP INFORMATION 4
Section 16(a) Beneficial Ownership Reporting Compliance 4
ARTICLE 1 5
ELECTION OF DIRECTORS 5
Directors' Fees and Other Compensation 7
Directors' Deferred Compensation Plan 7
Vote Required 7
CORPORATE GOVERNANCE 8
Director Independence 8
Board Committees 8
Board Meeting Attendance 10
Shareholder Communications with the Board 10
Attendance at Annual Shareholders Meeting 11
Compensation Committee Interlocks and Insider Participation 11
Transactions with Management 11
AUDIT COMMITTEE REPORT 11
HUMAN RESOURCES COMMITTEE REPORT 12
STOCK PERFORMANCE GRAPH 14
EXECUTIVE OFFICERS 15
EXECUTIVE COMPENSATION 15
Summary Compensation Table 16
Annual Compensation 16
Retirement Savings Plan 17
Officer Incentive Plan 17
Supplemental Retirement Plan 19
ARTICLE 2 19
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS 19
Previous Change in Independent Auditors 19
Pre-Approval Required for Services of Independent Auditors 20
Fees Paid to Independent Auditors 20
Vote Required 21
ANNUAL REPORT 21
SHAREHOLDER NOMINATIONS AND PROPOSALS 21
Shareholder Nominations 21
Shareholder Proposals 21
Use of Discretionary Authority in Connection with Shareholder
Nominations and Proposals 22
Inclusion of Shareholder Proposals in Company Proxy Materials 22
OTHER MATTERS 22
Appendix A-Audit Committee Charter A-1
COMMUNITY BANCORP.
Derby Road
Route 5
Derby, Vermont 05829
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May 4, 2004
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Community Bancorp. (the "Company")
for use at the annual meeting of shareholders and any adjournments of that
meeting. The annual meeting will be held on Tuesday, May 4, 2004, at 5:30
p.m. at the Elks Club in Derby, Vermont. The proxy statement and related
proxy card are first being sent to shareholders on or about April 1, 2004.
GENERAL VOTING INFORMATION
Who is entitled to vote at the annual meeting?
Only shareholders of record on the record date for the meeting are entitled
to vote. The record date is the close of business on March 9, 2004.
How many votes do I have?
Each issued and outstanding share of common stock is entitled to one vote
on each matter presented for vote at meeting.
How do I vote?
You may vote by completing and returning the enclosed proxy card in the
postage-paid envelope or by voting in person at the meeting. A written
ballot will be distributed at the meeting for those shareholders of record
who wish to vote in person.
Can I change my vote after submitting the proxy card?
Yes. If you submit your proxy card and later decide that you wish to change
or revoke your proxy, you may do so at any time before the proxy is
exercised at the annual meeting, by
* giving written notice of revocation to Chris Bumps, Corporate
Secretary, Community Bancorp., P.O. Box 259, Derby, Vermont
05829;
* executing a later-dated proxy card and giving written notice to
the Corporate Secretary; or
* voting in person after giving written notice of revocation of
your proxy to the Corporate Secretary.
If you need another proxy card to revoke an earlier proxy or if you have
any questions, please call the Corporate Secretary at 802-334-7915.
The last vote you submit will supersede all your prior vote(s).
1
How many shares are entitled to vote at the meeting?
As of the record date for the meeting (March 9, 2004), there were 3,801,998
shares of the Company's common stock issued and outstanding and entitled to
vote at the meeting.
What constitutes a quorum and how are votes counted for that purpose?
In order to conduct business at the meeting, a quorum must be present. A
majority (more than 50%) of the outstanding shares of the Company's common
stock, present in person or represented by proxy, will constitute a quorum
at the meeting. Shares represented by proxies or ballots, including those
marked "withhold" on Item 1 (Election of Directors) or "abstain" on Item 2
(Ratification of Selection of Independent Auditors), will be treated as
shares present or represented at the meeting for purposes of determining a
quorum.
What are "broker non-votes" and how do they affect calculation of a quorum
or voting on any matter?
Shares held in "street name" by brokers (meaning shares held in the name of
brokers or their nominees but actually owned by the brokers' customers)
must generally be voted by the broker in accordance with your instructions.
Proxies submitted by brokers that do not indicate a vote for some or all of
the proposals because they do not have discretionary voting authority and
have not received instructions as to how to vote on those proposals (so-
called "broker non-votes") will be deemed present or represented at the
meeting for purposes of a quorum. However, like abstentions, broker non-
votes are not counted as votes cast and therefore will not affect the
outcome of any matter to be voted on at the meeting.
What does it mean if I received more than one proxy card?
If you received more than one proxy card, your shares are registered in
different names (for example, "John Smith" and "J. Smith") or are in more
than one account. Sign and return all proxy cards to ensure that all your
shares are voted. Please have all your accounts registered in the same name
and address. You may do this by contacting the Corporate Secretary at 802-
334-7915.
How do I vote if my shares are held in the name of a broker or bank?
If your shares are held by a broker or bank, you must follow the voting
instructions on the form you receive from your broker or bank. This is the
case because your broker or bank, not you, is the record holder of the
shares for purposes of determining who is entitled to vote shares at the
meeting and is therefore the party in whose name the shares must be voted.
How are proxies being solicited and who pays the expenses?
Proxies are being solicited by mail. They may also be solicited by the
Company's directors and officers and by the directors, officers and
employees of the Company's wholly-owned subsidiary, Community National Bank
(the "Bank"). Those individuals may solicit proxies personally or by
telephone or electronic communication but they will not receive any
additional compensation for any such efforts. In addition, the Company has
arranged with brokerage houses, banks and other custodians, nominees and
fiduciaries to send to their principals this proxy statement, proxy card
and accompanying annual report to shareholders, and will reimburse them for
out-of-pocket expenses they incur in forwarding the materials.
2
How many votes are required for the election of directors?
The affirmative vote of a plurality of the shares present in person or
represented by proxy at the meeting and entitled to vote on Item 1
(Election of Directors) is required for the election of directors. A
"plurality" means receiving a higher number of votes than any other
candidate. At the annual meeting, four director seats will be filled.
Therefore, the four nominees receiving the four highest vote totals will be
elected as directors.
Shares represented by proxies or ballots marked "WITHHOLD" on Item 1
(Election of Directors) and broker non-votes, if any, will not have any
direct effect on the outcome of the election of directors or result in the
defeat of any of the Board's nominees, if there are no other nominees for
any of the open board seats. There are no other nominees at present.
Votes on Item 1 will be counted in vote totals announced at the annual
meeting by the inspectors of election.
How many votes are required to ratify the selection of Berry, Dunn, McNeil
& Parker as the Company's independent auditor?
Approval of selection of the Company's independent auditor would require
that more votes are cast in favor than are cast against the proposal.
Shares represented by proxies or ballots marked "ABSTAIN" on Item 2
(Ratification of Selection of Independent Auditors) and broker non-votes,
if any, are not treated as votes cast and, therefore, would have no effect
on the outcome of the vote to ratify the selection of the Company's
independent auditors.
Votes on Item 2 will be counted and vote totals announced at the annual
meeting by the inspectors of election.
How many votes are required to approve any other matter that may come
before the meeting?
The management and directors of the Company do not know of any other matter
that may be put to a vote at the meeting. If such a matter does arise, any
shares represented by proxies may be voted at the discretion of the
attorneys-in-fact named in the proxies, to the extent permitted by law.
Approval of any such other matter would require that more votes be cast for
the matter than against. Abstentions from voting and broker non-votes, if
any, are not treated as votes cast and therefore, would have no effect on
the vote to approve any such other matter.
May shareholders submit nominations for election as directors or for
consideration of other
matters?
The Company's bylaws include a process shareholders should follow if they
wish to submit director nominations or propose other action for vote by the
shareholders. The deadline for submissions relating to the 2004 annual
meeting was January 6, 2004 (120 days before the annual meeting). The
deadline for submissions for the 2005 annual meeting is January 4, 2005.
Additional information about this process is contained elsewhere in this
proxy statement under the caption "SHAREHOLDER NOMINATIONS AND PROPOSALS."
3
In addition, the Corporate Governance/Nominating Committee of the Board of
Directors will consider recommendations made by shareholders for possible
nominees for election as directors. Additional information about this
process is contained elsewhere in this proxy statement under the caption
"CORPORATE GOVERNANCE-Board Committees-Corporate Governance/ Nominating
Committee."
SHARE OWNERSHIP INFORMATION
The following table shows the amount of common stock beneficially
owned by all directors (including nominees standing for re-election) and
executive officers of the Company as a group.
Amount & Nature of Beneficial
Ownership of Common Stock (1)
-----------------------------
Sole Voting Shared Voting
& Investment & Investment Percent of
Power Power Class
------------ ------------- ----------
All Directors, Nominees & Executive
Officers as a Group (11 in number) 375,361 62,700 11.52%
--------------------
Shareholdings are as of March 9, 2004, except for shares held in an
IRA account for one individual, which are as of February 27, 2004.
Share information for the group includes 72,455 shares held
indirectly by three of the members of the group by virtue of their
investment in the Community Bancorp. stock fund under the Company's
Retirement Savings Plan.
In addition, as of March 9, 2004, 447,413 shares (11.77% of the
Company's issued and outstanding common stock) were held in fiduciary
capacity by the Company's affiliated trust and investment management
company, Community Financial Services Group, LLC ("CFSG"), including
241,602 shares, or 6.34%, held for the account of participants in the
Company's Retirement Savings (410(k)) Plan. It is CFSG's practice not to
vote shares of the Company's common stock unless instructions are received
from the beneficial owner.
Except as set forth above, the Company is not aware of any
individual, group, corporation or other entity owning beneficially more
than 5% of the Company's outstanding common stock. The Company has no other
authorized class of stock.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors to file reports of ownership and changes
in ownership with the Securities and Exchange Commission (SEC) and to
furnish the Company with copies of all such reports. The Company has
reviewed the copies of the Section 16 reports filed by the directors and
officers, or written representations from them that no Forms 5 were
required to be filed for 2003. Based solely on such review, the Company
believes that all Section 16 filing requirements applicable to its officers
and directors for 2003 were complied with.
4
ARTICLE 1
ELECTION OF DIRECTORS
The Amended and Restated Articles of Association and the By-laws of
the Company provide for a Board of no fewer than nine and no more than
twenty-five directors, to be divided into three classes, as nearly equal in
number as possible, each class serving for a period of three years. The
Board of Directors currently consists of 10 members and the Corporate
Governance/Nominating Committee of the Board has determined to maintain the
number of directors at 10 for the ensuing year. The directors in the class
whose terms will expire at the 2004 annual meeting of shareholders are
Michael H. Dunn, Marcel M. Locke, Stephen P. Marsh and Dale R. Wells and
each will stand for re-election to a three year term at the annual meeting.
Unless authority is withheld, proxies solicited hereby will be voted
in favor of the four nominees, to hold office until the 2007 annual meeting
of shareholders or until their successors are elected and qualify. If for
any reason not now known by the Company, any of such nominees should not be
able to serve, proxies will be voted for a substitute nominee or nominees
designated by the Board of Directors, or to fix the number of directors at
fewer than ten, as the directors in their discretion may deem advisable.
The following table sets forth certain information concerning each of
the nominees and other incumbent directors:
Community Bancorp.
Director of Common Stock
Community Beneficially Owned
Principal Bancorp. and Percent of
Name and Age Employment Since (1) Class (2)
----------------------------------------------------------------------------------------------
Nominees to serve (if elected) until 2007 annual meeting:
Michael H. Dunn Book Dealer 1998 71,274(3) 1.87%
Age 62 Derby, VT
Marcel M. Locke Former Proprietor, Parkview Garage 1986 10,460(4) .28%
Age 65 Orleans, VT
Stephen P. Marsh President, Chief Operating Officer, 1998 50,698(5) 1.33%
Age 56 Treasurer and Director, Community
Bancorp.; President, Chief Operating
Officer and Director, Community
National Bank
Derby, VT
Dale R. Wells President, 1996 5,917 .16%
Age 58 Dale Wells Building Contractor, Inc.
St. Johnsbury, VT
5
Community Bancorp.
Director of Common Stock
Community Beneficially Owned
Principal Bancorp. and Percent of
Name and Age Employment Since (1) Class (2)
----------------------------------------------------------------------------------------------
Incumbent Directors to serve until 2006 annual meeting:
Elwood Duckless Past President, 1987 132,892(6) 3.50%
Age 63 Newport Electric Co.
Newport, VT
Rosemary M. Lalime Principal Broker and Owner 1985 48,545 1.28%
Age 57 All Seasons Realty
Newport, VT
Anne T. Moore Principal Real Estate Broker 1993 22,676 .60%
Age 60 Taylor Moore Agency Inc.
Derby, VT
(insurance and real estate)
Incumbent Directors to serve until 2005 annual meeting:
Thomas E. Adams Owner, NPC Realty, Inc. 1986 25,158(7) .66%
Age 57 Holland, VT
Jacques R. Couture Dairy Farmer/Maple Producer 1992 6,356(8) .17%
Age 53 Westfield, VT
Richard C. White Chairman, Chief Executive Officer 1983 56,422(9) 1.48%
Age 58 and Director, Community Bancorp.
and Community National Bank
Derby, VT
--------------------
Each nominee and incumbent director is also a director of Community
National Bank. The dates indicated in the table reflect only service
on the Board of Directors of the Company and not Community National
Bank.
Except as otherwise indicated in the footnotes to the table, the
named individuals possess sole voting and investment power over the
shares listed. Shareholdings are as of March 9, 2004, except for
shares held in Mr. White's IRA, which are as of February 27, 2004.
Includes 8,274 shares held by a Company of which Mr. Dunn is
President and over which he has sole voting power.
Includes 4,630 shares held by Mr. Locke jointly with his wife, as to
which voting and investment power is shared.
Includes (i) 29,378 shares held by Mr. Marsh jointly with his wife,
as to which voting and investment power is shared; and (ii) 20,438
shares indirectly owned by Mr. Marsh by virtue of his participation
in the Community Bancorp. stock fund under the Company's Retirement
Savings Plan.
Includes 22,610 shares held in trust for the benefit of Mrs.
Duckless. Mr. Duckless has shared voting and investment power over
the shares held in trust for Mrs. Duckless.
Includes 10,473 shares held in an IRA for Mr. Adams' benefit.
(footnotes continued on following page)
6
Includes (i) 3,784 shares held by Mr. Couture jointly with his wife,
as to which voting and investment power is shared; (ii) 63 shares
held in a custodial account for Mr. Couture's minor child; and (iii)
436 shares held in an IRA for Mr. Courture's benefit. Does not
include 200 shares held in an IRA for the benefit of Mr. Couture's
spouse.
Includes (i) 44,354 shares indirectly owned by Mr. White by virtue of
his participation in the Community Bancorp. stock fund under the
Company's Retirement Savings Plan; (ii) 4,877 shares held in an IRA
for Mr. White's benefit; and (iii) 2,298 shares held by Mr. White
jointly with his wife, as to which voting and investment power is
shared.
--------------------
Directors' Fees and Other Compensation
Directors of the Company who are not salaried employees of the Bank
receive an annual retainer of $4,500 for serving on the Board and a fee of
$250 per Board meeting. During 2003, each director of the Company also
served as a director of the Bank. Bank directors who are not salaried
employees of the Bank receive an annual retainer of $4,500, a fee of $250
per Board meeting and a fee of $250 per committee meeting. In addition to
the fees for meetings of the Bank's Board of Directors and its committees,
each Bank director attends at least seven meetings per year of the Bank's
local advisory boards and receives a fee of $250 per meeting, except for
Mr. White and Mr. Marsh, who do not receive any fees for such attendance.
This fee structure is intended to compensate the Bank's directors for
attendance at Board meetings as well as for the time spent by them in
activities directly related to their service on the Board for which they
receive no additional compensation, including but not limited to attendance
at the annual directors' retreat and attendance at educational seminars or
programs on pertinent banking or corporate governance topics.
Directors who have served on the Board of the Company and/or the Bank
for at least five years and who are not salaried employees of the Bank are
entitled to receive upon retirement from the Board a lump sum payment of
$1,000 for each year of Board service. For this purpose, service rendered
as a director of the Company and of the Bank is not compensated separately.
The retirement benefits under this arrangement represent a general
unsecured obligation of the Company and no assets of the Company or the
Bank have been segregated to satisfy the Company's obligations under the
arrangement.
From time to time directors perform evaluations of loan collateral
for the Bank and are reimbursed for such services at the rate of $25 per
hour.
Directors' Deferred Compensation Plan
Under the terms of the Company's Deferred Compensation Plan for
Directors, directors of the Company and/or the Bank may elect to defer
current receipt of some or all of their director fees. Deferrals are
credited to a cash account which bears interest at the rate in effect for
the Bank's three-year certificate of deposit, as adjusted from time to
time. Payments are deferred until the participant's retirement, death or
disability, or at an earlier or later date elected by the participant and
are made in a lump sum or in monthly installments, as selected by the
participant. Amounts deferred and accumulated interest represent a general
unsecured obligation of the Company and no assets of the Company or the
Bank have been segregated to satisfy the Company's obligations under the
Plan.
Vote Required
Election of a nominee for director will require a plurality of the
votes cast in the election.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ARTICLE 1.
7
CORPORATE GOVERNANCE
Director Independence
Each of the Company's Directors is independent within the meaning of
the listing standards of the National Association of Securities Dealers
(NASD), except for Messrs. Marsh and White, who are executive officers of
the Company and the Bank. An independent director is a person other than an
officer or employee of the Company or the Bank or any other individual
having a relationship which, in the opinion of the Board of Directors,
would interfere with the exercise of independent judgment in carrying out
the responsibilities of directors. In order to be considered independent
under NASD standards, a director must not have (i) been employed by the
Company or any of its affiliates during the past three years; (ii) accepted
any compensation from the Company or its affiliates in excess of $60,000
during the previous fiscal year, except for compensation for Board service,
and certain retirement benefits or non-discretionary compensation; (iii)
had an immediate family member who during the past three years was an
executive officer of the Company or any of its affiliates; (iv) been a
principal of any other for-profit business to which the Company made or
from which it received payments, in any of the past three years, that
exceeded the greater of $200,000 or 5% of the annual consolidated gross
revenues of the Company or of the other entity; or (v) been an executive
officer of any other entity where any of the Company's executives serves on
that other entity's compensation committee.
Board Committees
During 2002 the Board approved certain changes to the Company's
Bylaws, designed to enhance the Company's corporate governance structure.
These changes included a new Board committee structure, which the Board
implemented during 2003 by appointing two new standing committees, a
Compensation Committee and a Corporate Governance/Nominating Committee. The
Board also revised the charter of the Board's other standing committee, the
Audit Committee, to further respond to the governance and oversight
requirements of the Sarbanes-Oxley Act of 2002. Additional information
about each of the Company's three standing committees is set forth below.
Compensation Committee. The Company's Board of Directors appointed a
standing Compensation Committee at the holding company level for the first
time in the second half of 2003. However, compensation committee functions
were performed in 2003, as in prior years, at the subsidiary level, by the
Bank's compensation committee (known as its Human Resources Committee).
That committee's responsibilities during 2003 included reviewing and making
recommendations to the Bank's Board of Directors concerning the
compensation of the Bank's officers and employees. The members of the
Bank's Human Resources Committee during 2003 were Thomas Adams, Michael
Dunn, Rosemary Lalime, Stephen Marsh, Dale Wells and Richard White. The
Bank's Human Resources Officer also attended meetings of the Committee but
was not a member and did not vote on matters considered by the Committee.
Mr. White and Mr. Marsh did not vote on matters affecting their own
compensation. The Bank's Human Resources Committee met three times during
2003. A report of the Human Resources Committee regarding executive
compensation is set forth elsewhere in this proxy statement under the
caption "HUMAN RESOURCES COMMITTEE REPORT."
For 2004 and future years, review and recommendations for the
compensation and benefits of the Company's executive officers will be made
by the Company's Compensation Committee rather than the Bank's Human
Resources Committee. The members of the Compensation Committee are Rosemary
Lalime (Chair), Thomas Adams, Michael Dunn and Dale Wells. During 2003, the
Compensation
8
Committee met two times. The charter of the Compensation Committee is
available on the Company's website at www.communitybancorpvt.com.
Corporate Governance/Nominating Committee. The Corporate
Governance/Nominating Committee considers and makes recommendations on
matters related to the practices, policies and procedures of the Board and
takes a leadership role in shaping the corporate governance of the Company.
As part of its duties, the Committee assesses the size, structure and
composition of the Board and its committees, coordinates evaluation of
Board and committee performance, makes recommendations as to the structure
of Board meetings and flow of information to the Board and reviews Board
compensation.
The Committee also acts as a screening and nominating committee for
candidates considered for election to the Board. In this capacity it has
established minimum criteria for Board nominees. The Committee believes it
would be desirable for a Board candidate to possess the following
characteristics: (a) have experience in the management or leadership of a
substantial private business enterprise, educational, religious or not-for-
profit organization, or such other professional experience as the Committee
deems appropriate; (b) be a shareholder of the Company; (c) be willing and
able to devote full interest and attendance to the Board and its
committees; (d) bring business to the Company and its affiliate, Community
Financial Services Group, including personal, business and investment
accounts; (e) help develop business and promote the Company and its
subsidiary and affiliate throughout our service area; (f) provide advice
and counsel to the Board and senior management; (g) bring a diversity of
interests to the Board as evidenced by participation in community,
charitable or other similar activities; (h) have the ability to serve at
least seven years before reaching the mandatory retirement age; and (i)
maintain integrity and confidentiality at all times. Evaluation of
candidates occurs on the basis of materials submitted by or on behalf of
the candidate. If a candidate continues to be of interest after initial
consideration by the Committee, additional information about her/him will
be obtained through inquiries to various sources and, if warranted,
interviews.
All the director nominees named in this proxy statement met the
Board's criteria for membership and were recommended by the Corporate
Governance/Nominating Committee for election by shareholders at this annual
meeting.
The Committee will consider prospective nominees recommended by
shareholders. Any shareholder wishing to recommend a person for
consideration as a Board nominee should submit to the Committee the same
information that would be required if the shareholder were to desire to
make a nomination from the floor at the annual meeting. The required
information is described elsewhere in this proxy statement under the
caption "SHAREHOLDER NOMINATIONS AND PROPOSALS-Shareholder Nominations."
The Committee uses the same criteria for evaluating candidates recommended
by shareholders as it does for those proposed by other Board members or
management.
The members of the Corporate Governance/Nominating Committee are
Jacques Couture (Chair), Rosemary Lalime, Marcel Locke and Anne Moore.
During 2003, the Committee met two times. The charter of the Corporate
Governance/Nominating Committee is available on the Company's website at
www.communitybancorpvt.com.
Audit Committee. The Audit Committee is governed by a Board-approved
charter that contains, among other things, the Committee's membership
requirements and responsibilities. A copy of that charter, as revised and
updated in 2003 and 2004, is attached to this proxy statement as Appendix
A. The Audit Committee oversees the Company's accounting and financial
reporting process, internal controls and audits, and consults with
management, the internal auditors and the independent auditors on, among
9
other items, matters related to the annual audit, the published financial
statements and the accounting principles applied. As part of its duties,
the Audit Committee appoints, evaluates and retains the Company's
independent auditors. It has responsibility for the compensation,
termination and oversight of the Company's independent auditors and
evaluates the independent auditors' qualifications, performance and
independence. The Audit Committee pre-approves all services provided by the
independent auditors. Those services and fees are described elsewhere in
this proxy statement under the caption "RATIFICATION OF SELECTION OF
INDEPENDENT AUDITORS-Fees Paid to Independent Auditors." Further, the Audit
Committee has established procedures for the receipt, retention and
treatment, on a confidential basis, of complaints received by the Company
regarding accounting, internal accounting controls or auditing matters.
Under SEC rules, companies must disclose whether at least one member
of the Audit Committee qualifies as a "financial expert." As defined by the
SEC, the concept of financial expert is heavily focused on individuals who
have prepared or audited public company financial statements or have had
similar management experience or responsibility or others performing those
or comparable functions. Given the Company's rural market area and the
limited number of public companies in it, the Board has not deemed it
advisable to require that the Audit Committee include a person qualifying
as a financial expert under this definition. The Board has considered the
business experience and other qualifications of each of the members of the
Audit Committee and has concluded that each of them has demonstrated that
he is capable of (i) understanding generally accepted accounting principles
("GAAP") and financial statements, (ii) assessing the general application
of GAAP principles in connection with the accounting for estimates,
accruals and reserves, (iii) analyzing and evaluating the Company's
financial statements, (iv) understanding internal controls and procedures
for financial reporting, and (v) understanding audit committee functions.
Given the business experience and acumen of each of the members of the
Audit Committee, the Board believes that each of such persons, although not
a "financial expert" under the SEC definition, is nevertheless qualified to
carry out all of the duties and responsibilities of a member of the
Company's Audit Committee.
The members of the Audit Committee are Thomas Adams (Chair), Elwood
Duckless, Michael Dunn and Dale Wells. During 2003 the Company's Audit
Committee met seven times. A report of the Company's Audit Committee is set
forth elsewhere in this proxy statement under the caption "AUDIT COMMITTEE
REPORT."
Board Meeting Attendance
The Company's Board of Directors held five regular meetings and five
special meetings during 2003. Each incumbent director attended at least 75%
of the aggregate of all such meetings. In addition, all of the Company's
directors serve on the Bank's Board of Directors (which meets monthly) and
on various Board committees. Each of the directors attended at least 75% of
the scheduled Bank Board and committee meetings.
Shareholder Communications with the Board
The Board welcomes communications from shareholders on matters
relating to the Company's business operations and corporate governance.
Shareholders may communicate with the Board, or its committees or
individual directors, by writing to the following address: Board of
Directors [or Board Committee or name of individual director]-Shareholder
Communications; c/o Corporate Secretary, Community Bancorp., P.O. Box 259,
Derby, Vermont 05829. The Corporate Secretary will forward communications
to the Board or appropriate committee or individual director.
10
Attendance at Annual Shareholders Meeting
All directors are encouraged and expected to attend the annual
shareholders meeting. All of the Company's ten directors attended the 2003
annual meeting.
Compensation Committee Interlocks and Insider Participation
The Company is not aware of the existence of any interlocking
relationships between the senior management of the Company and that of any
other company.
Transactions with Management
Some of the incumbent directors, nominees and executive officers of
the Company, and some of the corporations and firms with which these
individuals are associated, are customers of Community National Bank in the
ordinary course of business, or have loans outstanding from the Bank, and
it is anticipated that they will continue to be customers of and indebted
to the Bank in the future. All such loans were made in the ordinary course
of business, do not involve more than normal risk of collectibility or
present other unfavorable features, and were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the
same time for comparable Bank transactions with unaffiliated persons,
although directors were generally allowed the lowest interest rate given to
others on comparable loans.
AUDIT COMMITTEE REPORT
The Audit Committee consists of four Directors, each of whom meets
applicable legal standards for independence. The Audit Committee's primary
responsibility is to oversee the Company's financial reporting process and
to report the results of its activities to the Board. Management is
responsible for preparing the Company's financial statements and the
independent auditors are responsible for auditing those statements.
Among the responsibilities of the Audit Committee include selecting
an accounting firm to be engaged as the Company's independent auditors.
Additionally, and as appropriate, the Audit Committee reviews and
evaluates, discusses and consults with the Company's management, the
Company's internal auditor and its independent auditors, regarding the
following matters:
* The plan and budget for, and the independent auditors' report
on, the audit of the Company's financial statements;
* The Company's financial disclosure documents, including all
financial statements and reports filed with the SEC or sent to
shareholders;
* Changes in the Company's auditing practices, principles,
controls or methodologies, or in the Company's financial
statements.
* Significant developments in auditing rules;
* The adequacy of the Company's internal auditing controls, and
its accounting, financial and auditing personnel; and
* The establishment and maintenance of an environment within the
Company that promotes and encourages quality financial
reporting, sound business risk practices and ethical behavior.
11
The Audit Committee is responsible for recommending to the Board that
the Company's financial statements be included in the Company's annual
report. The Committee took a number of steps in making this recommendation
for the year ended 12/31/03. First, the Committee discussed with Berry,
Dunn, McNeil & Parker, the Company's independent accountants for 2003,
those matters Berry, Dunn, McNeil & Parker communicated to and discussed
with the Committee under Statement on Auditing Standards No. 61
(Communications with Audit Committees), including information regarding the
scope and results of the audit. These communications and discussions are
intended to assist the Audit Committee in overseeing the financial
reporting and disclosure process. Second, the Committee discussed with, and
received a letter from, Berry, Dunn, McNeil & Parker concerning their
independence from the Company and its management as required under
Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees). This discussion and disclosure informed the Committee of
Berry, Dunn, McNeil & Parker's independence and assisted the Committee in
evaluating such independence. The Committee also considered applicable
auditor independence standards under the Sarbanes-Oxley Act and related
regulations of the Securities and Exchange Commission. Finally, the
Committee reviewed and discussed the Company's financial statements with
the Company's management.
Based on the discussions with Berry, Dunn, McNeil & Parker, on the
independence discussions, and on the financial statement review, the Audit
Committee recommended to the Board that the financial statements be
included in the Company's 2003 Annual Report on Form 10-K for filing with
the Securities and Exchange Commission.
The Audit Committee has established procedures for the treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters. The Committee has also established
procedures for the confidential, anonymous submission by employees of
concerns regarding questionable accounting or auditing matters. No such
complaints or concerns were received in 2003.
Submitted by the Community Bancorp. Audit Committee
Thomas E. Adams, Chair
Elwood G. Duckless
Michael H. Dunn
Dale Wells
HUMAN RESOURCES COMMITTEE REPORT
The Bank's Human Resources Committee reviews and makes
recommendations to the full Board of the Bank on all compensation and
benefits issues relating to the President, Chief Operating Officer, Chief
Executive Officer and other executives of the Bank. The recommendations
relating to the CEO are formulated at the time of Mr. White's annual
performance evaluation, which usually occurs in June. Mr. White makes
recommendations to the Committee with respect to the compensation of the
other executive officers, which are then acted on by the Committee and
recommended to the full Board.
The Committee and Board believe they have designed a compensation
package for the executive officers that will attract and retain competent
senior management for the Bank and provide for appropriate rewards for both
personal and Bank performance.
To reach these objectives, the Bank provides for a base salary which
is reviewed annually in relation to each individual's performance and a
cash bonus as a short term incentive, the amount of which depends upon the
Bank's performance. (The Bank's Officer Incentive Plan is described
elsewhere in this
12
proxy statement.) The Bank does not currently provide for long term
incentives, such as stock options or similar benefits.
In determining appropriate salary levels, the Committee and the Board
review not only various individual and corporate performance indicators,
but also annual salaries and short term incentives provided by similar
companies to their senior officers. In 2002 and 2003, the Bank employed the
services of the Human Resources Consulting Division of Gallagher, Flynn &
Company, LLP to conduct an analysis of its compensation program and to
develop competitive salary ranges for officers and other exempt positions.
The Bank adopted recommended salary ranges for these positions, including a
range for President & CEO of $128,000 to $190,000.
Resources used by Gallagher, Flynn & Company include Financial
Institutions Compensation Survey Results (FISB), Sheshunoff Compensation
and Benefits Survey Data, Watson Wyatt Financial Institutions Compensation
Survey (WW), and the Bank Administration Institute (BAI).
In Mr. White's case, the Board's annual review process includes
consideration of his self-evaluation covering certain key elements of his
written job description, including strategic planning, establishment and
overall implementation of operating policies, management of shareholder and
community relations and regulatory matters. The Board also undertakes its
own evaluation of Mr. White, reviewing various matters, including
leadership, planning and organization abilities, creativity and problem
solving, CRA (community reinvestment) and compliance.
Mr. White's strong performance in each of these areas resulted in the
adjustment (effective July 1, 2003) of his annual base salary rate from
$170,000 to $175,500, representing a 3% increase.
The table below illustrates Mr. White's base salary in 2002 and 2003
in relation to his peers at comparable companies as indicated in the
compensation surveys listed above:
Mr. White 2003 $175,500
Mr. White 2002 $170,000
Survey Average Base Salary (2002 & 2003)
FISB All NE Banks $189,305
FISB All VT Banks $224,800
Sheshunoff $196,745
WW $185,800
BAI $177,000
The Committee also reviews, and makes recommendations to the full
Board relating to major personnel policies including compensation and
benefit programs for other officers and staff. The Committee oversees the
administration of all of the Bank's compensation and benefit plans,
including the Bank's Officer Incentive Plan, the Company's Retirement
Savings Plan, and the Supplemental Retirement Plan for key employees, and
reviews the investment performance of plan trustees.
The Committee comprises four non-employee directors plus the CEO, the
Chief Operating Officer (COO) and the Vice President - Human Resources.
None of these officers participates in recommendations or decisions
pertaining to their own salary and benefits although CEO White does
13
participate in recommendations and decisions regarding the compensation of
the COO and the Vice President-Human Resources.
Community National Bank Human Resources Committee
Thomas E. Adams Rosemary M. Lalime
Michael H. Dunn Dale R. Wells
Stephen P. Marsh Richard C. White
Kathryn M. Austin
Pursuant to the rules and regulations of the Securities and Exchange
Commission, neither the foregoing Audit Committee Report, the foregoing
Human Resources Committee report nor the material set forth below under the
caption "STOCK PERFORMANCE GRAPH" shall be deemed to be filed with the SEC
for purposes of the Securities Exchange Act of 1934, nor shall either of
such Reports or such other material be deemed to be incorporated by
reference in any past or future filing by the Company under the Securities
Exchange Act of 1934 or the Securities Act of 1933, as amended.
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return
(stock price appreciation plus reinvested dividends) on the Company's
common stock with the cumulative total return of the NASDAQ Composite Index
and the NASDAQ Bank Stock Index for the five years ended December 31, 2003.
Both indices are unmanaged indices maintained by NASDAQ.
Community Bancorp. NASDAQ Composite NASDAQ Banks
Value Value Value
End of End of End of
Quarter/Year Period Period Period
------------ ------------------ ---------------- ------------
Dec-98 $100.00 $100.00 $100.00
Mar-99 $114.04 $112.25 $ 96.72
Jun-99 $111.50 $122.50 $103.17
Sep-99 $ 94.66 $125.24 $ 93.00
Dec-99 $ 90.83 $185.59 $ 93.45
Mar-00 $ 86.40 $203.31 $ 84.56
Jun-00 $ 93.14 $180.88 $ 82.73
Sep-00 $ 99.88 $167.50 $ 98.29
Dec-00 $108.75 $112.67 $107.16
Mar-01 $119.79 $ 83.93 $104.05
Jun-01 $126.92 $ 98.49 $116.36
Sep-01 $144.71 $ 68.35 $113.81
Dec-01 $158.56 $ 88.95 $117.96
Mar-02 $159.65 $ 84.16 $129.23
Jun-02 $165.88 $ 66.73 $132.93
Sep-02 $181.22 $ 53.45 $121.52
Dec-02 $192.46 $ 60.91 $123.28
Mar-03 $188.66 $ 61.17 $120.38
Jun-03 $206.01 $ 74.01 $135.83
Sep-03 $200.51 $ 81.50 $143.22
Dec-03 $208.72 $ 91.37 $160.18
--------------------
* Compares cumulative total shareholder return (stock price
appreciation plus reinvested dividends) on the Company's common stock
with the cumulative total return of the NASDAQ Composite Index and
NASDAQ Bank Stock Index for the five years ended December 31, 2003,
assuming an initial investment of $100 at the end of 1998 and
reinvestment of dividends during the periods indicated. Stock price
information for the Company's common stock used in the comparison is
based on information reported in the OTC Bulletin Boardr maintained
by NASDAQ and has not been retroactively adjusted to reflect the
effect of a 5% stock dividend declared in 2002, which the Company
deems immaterial.
14
EXECUTIVE OFFICERS
The following table sets forth certain information regarding the
executive officers of the Company.
Position(s) with the Company and Subsidiaries
Name and Age and Occupation for the Past Five Years
-----------------------------------------------------------------------------------------
Richard C. White, 58 Chief Executive Officer and Chairman and Director, Community
Bancorp. and Community National Bank*
Stephen P. Marsh, 56 President, Chief Operating Officer, Treasurer and Director,
Community Bancorp. and Community National Bank*
Alan A. Wing, 59 Vice President, Community Bancorp.; and Executive Vice President,
Community National Bank*
--------------------
* Prior to January 6, 2004 (i) in addition to his current positions,
Mr. White served as President of both Community Bancorp. and
Community National Bank; (ii) Mr. Marsh served as Vice President,
Treasurer and Director of Community Bancorp. and Executive Vice
President, Chief Financial Officer and Director of Community National
Bank; and (iii) in addition to his current position with Community
Bancorp., Mr. Wing served as Senior Vice President of Community
National Bank.
EXECUTIVE COMPENSATION
The officers of the Company did not receive any compensation for
services rendered to the Company in 2003 and prior years, but did receive
compensation for services rendered in their capacities as officers of the
Bank.
The following table shows annual compensation for services rendered
in all capacities to the Company and its subsidiary during each of the
preceding three years paid to each executive officer of the Company whose
total salary and bonus in 2003 exceeded $100,000.
15
Summary Compensation Table
Annual Compensation
Name and
Principal All Other
Position Year Salary (1) Bonus (2) Compensation (3)
----------------------------------------------------------------------------------------------
Richard C. White, 2003 $181,958 $53,256 $28,558
President, CEO & Director of the 2002 158,623 31,279 30,623
Company and the Bank 2001 141,948 26,647 26,668
Stephen P. Marsh, 2003 117,614 33,285 31,053
Vice President, Treasurer & Director of 2002 103,195 19,550 24,622
the Company, Executive Vice President, 2001 92,386 16,654 21,839
CFO & Director of the Bank
Alan A. Wing, 2003 98,616 26,628 25,110
Vice President of the Company; 2002 89,924 15,640 21,172
Senior Vice President of the Bank 2001 83,558 13,323 19,429
--------------------
Includes voluntary salary deferrals pursuant to the Company's
Retirement Savings (401(k)) Plan, as follows: (i) for Mr. White,
2003, $11,442; 2002, $9,376; and 2001, $8,332; (ii) for Mr. Marsh,
2003, $7,470; 2002, $6,065; and 2001, $5,420; and (iii) for Mr. Wing,
2003, $6,201; 2002, $5,219; and 2001, $4,791.
All bonuses were paid under the Bank's Officer Incentive Plan
(described below) in the year indicated, for services rendered in the
prior year. Bonuses for services rendered in 2003 will be calculated
and paid in the second quarter of 2004.
Includes the following for Mr. White: (i) discretionary contributions
made by the Company for Mr. White's account under the Company's
Retirement Savings Plan, described below, as follows: 2003, $23,557;
2002, $25,935; and 2001, $12,892; (ii) matching employer
contributions made under the Retirement Savings Plan for his account,
as follows: 2003, $5,000; 2002, $4,688; and 2001, $4,166; and (iii)
contributions made under the Company's Money Purchase Plan
(discontinued in 2002), as follows: 2001, $9,610. Includes the
following for Mr. Marsh: (i) discretionary contributions made by the
Company for Mr. Marsh's account under the Company's Retirement
Savings Plan, as follows: 2003, $27,318; 2002, $21,589; and 2001,
$12,914; (ii) matching employer contributions made under the
Retirement Savings Plan for his account, as follows: 2003, $3,735;
2002, $3,033; and 2001, $2,710; and (iii) contributions made under
the Company's Money Purchase Plan, as follows: 2001, $6,215. Includes
the following for Mr. Wing: (i) discretionary contributions made by
the Company for Mr. Wing's account under the Company's Retirement
Savings Plan, as follows: 2003, $22,009; 2002, $18,562; and 2001,
$11,511; (ii) matching employer contributions made under the
Retirement Savings Plan for his account, as follows: 2003, $3,101;
2002, $2,610; and 2001, $2,396; and (iii) contributions made under
the Company's Money Purchase Plan, as follows: 2001, $5,522.
Except for the use of vehicles owned by the Bank by certain officers,
no director or executive officer received any special personal benefits
during 2003. In policy and practice, the Bank does not provide special
personal benefits to directors or officers.
16
Retirement Savings Plan
Employees who are age 21 or over and who have completed at least one
year of service (as defined in the plan) are eligible to participate in the
Community Bancorp. and Designated Subsidiaries' Retirement Savings Plan
(the "Plan"). The Plan contains features of a so-called 401(k) plan which
permit participants to make voluntary compensation deferrals on a tax-
deferred basis. For 2004 the Plan limits the maximum annual deferral per
participant to the lesser of 100% of compensation or $13,000. This maximum
is adjusted annually for inflation by the Internal Revenue Service. The
Company will make a discretionary matching contribution to the account of
participants equal to a percentage of the amount deferred. The matching
contribution percentage is established from time to time by the Company in
its sole discretion. The matching contribution percentage for 2004 has been
set at 50% of the amount deferred for deferrals of up to 5% of
compensation. Deferrals in excess of 5% of compensation are not matched by
the Company.
Participants are at all times fully vested in any rollover
contributions from other plans and in their own compensation deferrals.
Vesting in any matching employer contribution begins after one year of
service, with full vesting upon six years of service. Vesting in any
discretionary employer contribution begins in the first year of service,
with full vesting upon seven years of service. Participants may direct the
investment of their Plan account among several funds maintained by the Plan
trustee, including a Community Bancorp. stock fund. Distribution of Plan
accounts is generally deferred until the participant's death, disability or
retirement, except in cases of financial hardship (as defined in the Plan).
Benefits are subject to income tax upon distribution and certain early
withdrawals may be subject to an additional 10% penalty tax. Distribution
of Plan benefits may be in the form of an annuity, a lump sum in cash, or
in certain circumstances, common stock of the Company.
In addition to voluntary compensation deferrals and matching employer
contributions, the Company in 2003 made an annual discretionary profit
sharing contribution for the account of the four executive officers. The
amount of the contribution is determined annually based on a calculation of
the maximum allowable deductible contribution that the Company is permitted
to make on behalf of the executives, but subject to the annual contribution
limitations of the Internal Revenue Code. The amount of the contribution
made to Mr. White's, Mr. Marsh's and Mr. Wing's account for each of the
preceding three years is disclosed in the footnotes to the summary
compensation table set forth above.
Officer Incentive Plan
The Bank maintains an Officer Incentive Plan (the "Plan") for its
executive officers and for other officers and exempt employees whose
compensation is not commission based. Each executive officer, non-executive
officer and qualifying exempt employee having at least one year of service
is eligible to participate in the Plan. Under the Plan, two separate
incentive pools are established, one for the three executive officers and
another for all other officers and participating exempt employees. Prior to
2003, when the Board expanded the class of eligible employees, only Vice
Presidents were eligible to participate in the latter incentive pool.
17
Executive Officers. The incentive bonus pool for executive officers
is determined by the Bank's annual rating issued by IDC Financial
Publishing, Inc., an industry-wide recognized ranking service, under the
following formula:
Percent of
IDC Rating After-Tax Earnings
-------------------------------------------------
Below Average 0
Average 1.00%
Excellent 2.75%
Superior 3.75%
Top 3 in State and Superior 3.75%
The incentive pool determined under the above formula is allocated
among the three executive officers based on fixed percentages. Messrs.
White, Marsh and Wing were entitled to 40%, 25% and 20%, respectively, of
the incentive pool for 2002. Incentive payments made to Messrs. White,
Marsh and Wing during the preceding three years are shown in the summary
compensation table. The applicable percentages of after-tax earnings and
the percentage allocation of the incentive pool among the executive
officers are reviewed periodically by the Human Resources Committee and the
Bank's Board of Directors and may be modified in the Board's discretion. In
accordance with changes in the Company's Board committee structure, for
2004 and future years, it is expected that this oversight role will instead
be performed by the Company's Compensation Committee.
Because the amount of the incentive pool for executive officers
depends on the Bank's annual rating by IDC Financial Publishing, Inc.,
which is not issued until the second quarter of the following year, 2003
bonus information for such officers was not yet available as of the date of
preparation of this proxy statement.
Other Officers and Exempt Employees. The incentive pool for
participating officers (other than executive officers) and exempt employees
is determined as follows:
If the Bank attains at least 95% of net income as presented in its
budget and has a return on average assets greater than 1%, 1.75% of the
Bank's earnings will be placed in a pool and divided into shares. Each
qualifying exempt employee will be allotted shares based on his or her
involvement in other incentive plans and on their position in the Bank.
Part-time exempt employees will receive 50% of a full-time allotment.
If the Bank exceeds its budget by more than 5%, an additional pool
will be created and 15% of the amount over budget will be placed in this
separate pool. This pool will be divided among the same group of officers
and exempt employees, allotted based on their position in the Bank. Part-
time exempt employees will receive 50% of a full-time allotment.
Several officers are eligible to receive individual incentive awards
based upon the attainment of specific performance goals. These individual
incentives are accounted for in the allotment of shares in the incentive
pools and are paid in addition to incentive payouts described above.
Distributions under the Plan to officers (other than executive
officers) and other exempt employees are ordinarily payable in January for
services rendered during the preceding fiscal year.
18
Although the Board of Directors presently intends to maintain an
incentive plan, it may revise or replace the Plan at any time with a new
one. As a matter of policy, the Board views incentive compensation as an
important component of management compensation since it appropriately links
the performance of the Company and its subsidiary with the compensation of
those employees in the best position to contribute significantly to the
profitability of the enterprise.
Supplemental Retirement Plan
The Board of Directors has adopted a non-qualified Supplemental
Retirement Plan for Messrs. White, Marsh and Wing to replace estimated
benefits lost as a result of the previous termination of the Company's
defined benefit pension plan. The plan is intended to provide an annual
benefit at retirement approximating 75% of the average annual bonus
received by the officer during the years prior to retirement. It is
estimated that this benefit, combined with the projected benefits under the
Company's Retirement Savings Plan, will be approximately equal to the
benefit that would have been provided to the executive officers under the
terminated defined benefit pension plan. Benefit payments are funded by
annual contributions to a special purpose trust.
ARTICLE 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Audit Committee of the Board has appointed Berry, Dunn, McNeil &
Parker ("BDMP") as the Company's independent auditors to audit Community
Bancorp.'s consolidated financial statements for the year ending December
31, 2004. BDMP served as the Company's independent auditors for 2003 and
also provided certain tax and other audit-related services. See "Fees Paid
to Independent Auditors" below. Representatives of BDMP are expected to
attend the annual meeting, where they will be available to respond to
appropriate questions and, if they desire, to make a statement.
Although neither Vermont law nor our bylaws requires the submission
of the selection of the Company's independent auditors to the shareholders
for approval, the Board of Directors believes it is appropriate to give
shareholders the opportunity to ratify the decision of the Audit Committee.
Neither the Audit Committee nor the Board has made any determination as to
what action, if any, would be taken if the shareholders do not ratify the
appointment of BDMP as the Company's independent auditors for 2004.
Previous Change in Independent Auditors
BDMP was first appointed as the Company's external auditors for 2003.
Previously, the Company's external auditors were A.M. Peisch & Company, LLP
("A.M. Peisch"). On December 10, 2002 the Audit Committee informed the
Board of Directors that it had approved a change in the Company's external
auditors and had elected not to continue the engagement of A.M. Peisch
following completion of the 2002 year-end audit. The Audit Committee and
Board were satisfied with the professional competence and standing of A.M.
Peisch and did not have any disagreement with A.M. Peisch on any matter of
accounting principles or practices, financial statement disclosure, or
auditing scope or procedure during the two most recent fiscal years. A.M.
Peisch had not issued a report in the last two fiscal years containing
either a disclaimer or an adverse or qualified opinion, nor had A.M. Peisch
subsequently modified any of its reports as to uncertainty, audit scope or
accounting principles. In accordance with the rules of the Securities and
Exchange Commission, A.M. Peisch furnished a letter to the Company,
addressed to the Commission, stating that it agreed with the foregoing
statements.
19
Pre-Approval Required for Services of Independent Auditors
As part of its duties, the Audit Committee is required to pre-approve audit
and non audit services performed by the Company's independent auditors, in
order to ensure that the provision of such services does not impair the
auditors' independence. Under applicable law, certain services may not be
performed by the auditors under any circumstances. Consistent with these
legal requirements, the Audit Committee's charter (attached as Appendix A
to this proxy statement) provides that all permitted services must be
approved by the Audit Committee in advance. However, the Audit Committee
may delegate this authority to a member of the Committee, who is required
to inform the entire Committee of any approval taken pursuant to that
delegated authority. The Audit Committee does not delegate to management
its responsibilities to pre-approve services performed by the independent
auditors. Each of the services described below performed by BDMP was
preapproved by the Audit Committee.
Fees Paid to Independent Auditors
Audit Fees. BDMP (2003): The aggregate fee billed for professional services
rendered by BDMP for the audit of the Company's annual financial statements
included in the Company's Form 10-K and review of financial statements
included in each of the Company's Forms 10-Q for the year ended December
31, 2003 was $56,330.
A.M. Peisch (2002): The aggregate fee billed for professional services
rendered by A.M. Peisch for the audit of the Company's annual financial
statements included in the Company's Form 10-K and review of financial
statements included in each of the Company's Forms 10-Q for the year ended
December 31, 2002 was $60,650.
Audit-Related Fees. BDMP (2003): The aggregate fee billed for assurance and
related services rendered by BDMP related to the performance of the audit
or review of the Company's financial statements in the year ended December
31, 2003 was $9,590. These services related to the audit of the Company's
employee benefit plan, implementation of the Sarbanes-Oxley Act of 2002 and
the application of accounting pronouncements.
A.M. Peisch (2002): The aggregate fee billed for assurance and related
services rendered by A.M. Peisch related to the performance of the audit or
review of the Company's financial statements in the year ended December 31,
2002 was $7,000. These services related primarily to the audit of the
Company's employee benefit plan.
Tax Fees. BDMP (2003): The aggregate fee billed for professional services
rendered by BDMP for tax compliance, tax advice and tax planning in the
year ended December 31, 2003 was $12,603. These services included
preparation of federal and state tax returns, preparation of amended
federal and state tax returns, review of estimated tax payments, review of
compliance with information reporting requirements and tax planning.
A.M. Peisch (2002): The aggregate fee billed for professional services
rendered by A.M. Peisch for tax compliance, tax advice and tax planning in
the year ended December 31, 2002 was $12,500. These services included
preparation of federal and state tax returns, review of estimated tax
payments, review of compliance with information reporting requirements and
tax planning.
All Other Fees. BDMP (2003): There were no other fees billed for services
provided by BDMP, other than the services reported in the paragraphs above,
in the year ended December 31, 2003.
20
A.M. Peisch (2002): The aggregate fee filled for professional services
rendered by A.M. Peisch for all other services was $27,800. These services
related primarily to information technology review, miscellaneous
compliance and other consultations and expense reimbursements.
Vote Required
Ratification of the selection of the Company's independent auditors
for the ensuing year will require that more votes be cast "for" than
"against" the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ARTICLE 2.
ANNUAL REPORT
The Company's Annual Report to Shareholders for the year ended
December 31, 2003, including consolidated financial statements and the
report of BDMP thereon, accompanies this proxy statement.
SHAREHOLDER NOMINATIONS AND PROPOSALS
Shareholder Nominations
A shareholder may make a nomination for director from the floor at
the annual meeting, under procedures specified in the Company's By-Laws.
Advance written notice of proposed nominations must be given to the
Company. Such notice must be received by the Company on or before January
4, 2005 in order for a nomination to be made from the floor at the 2005
annual meeting. The notice of nomination should be sent to the attention of
the Corporate Secretary, Community Bancorp., P.O. Box 259, Derby, Vermont
05829 and must contain the following information for each nomination: (a)
the name and address of the shareholder of record who intends to make the
nomination, and if acting on behalf of a beneficial owner, the name and
address of such beneficial owner; (b) a representation that the nominating
shareholder is a shareholder of record of stock of the Company entitled to
vote at the meeting and intends to appear in person or by proxy at the
meeting to nominate the person specified in the notice; (c) the name and
address of the person to be nominated; (d) a description of all
arrangements or understandings between the shareholder and the nominee and
any other person or persons (naming such person or persons) pursuant to
which the nomination is to be made by the shareholder; (e) such other
information regarding the nominee as would have been required to be
included in a proxy statement filed under the proxy rules of the Securities
and Exchange Commission had the nominee been nominated by the Board of
Directors; and (f) the written consent of the nominee to serve as a
director of the Company if elected.
In addition to the above process for shareholder nominations from the
floor, the Compensation Committee will consider recommendations for
nominations by the Committee. See "CORPORATE GOVERNANCE-Board Committees-
Corporate Governance/ Nominating Committee" above.
Shareholder Proposals
A shareholder may present matters from the floor for action by the
shareholders at the annual meeting, under procedures specified in the
Company's By-Laws. Advance written notice of any matters to be presented
must be given to the Company. Such notice must be received by the Company
on or before January 4, 2005 in order to be considered at the 2005 annual
meeting. The notice should be sent to the attention of the Corporate
Secretary, Community Bancorp., P.O. Box 259, Derby, Vermont 05829 and must
contain the following information: (a) the name and address of the
shareholder who intends to make
21
a proposal, and if acting on behalf of a beneficial owner, the name and
address of such beneficial owner; (b) a representation that the shareholder
is a holder of record of the stock of the Company entitled to vote at such
annual meeting and intends to appear in person or by proxy at the meeting
to present his or her proposal; (c) a brief description of the proposal;
(d) the reasons for making the proposal; and (e) any direct or indirect
interest of the shareholder or any person on whose behalf the shareholder
is acting, in making such proposal.
Use of Discretionary Authority in Connection with Shareholder Nominations
and Proposals
Under the rules and regulations of the Securities and Exchange
Commission, the Company will be permitted to use its discretionary
authority conferred in the proxy card for the annual meeting to vote on a
shareholder proposal or director nominee even if the proposal or nominee
has not been discussed in the Company's proxy statement, unless the
shareholder-proponent has given timely notice to the Company of his or her
intention to present the proposal or nominee for vote at the meeting.
Assuming timely notice has been given, the proxies will only be voted on
the matter pursuant to the grant of discretionary authority if the Company
has described the proposal in the proxy statement and indicated how the
persons named as proxies intend to vote on the matter. As described above,
in order to be considered timely for consideration at the 2005 annual
meeting, the shareholder-proponent must furnish written notice to the
Company of the proposal or nominee no later than January 4, 2005.
Inclusion of Shareholder Proposals in Company Proxy Materials
If a shareholder seeks to have his or her proposals included in the
Company's proxy materials for the 2005 annual meeting, the notification
deadline is earlier than noted in the preceding paragraph. In order to be
included in the proxy material for the 2005 annual meeting, shareholder
proposals must be submitted in writing to the Secretary of the Company not
later than December 2, 2004, and must comply in all respects with
applicable rules and regulations of the Securities and Exchange Commission
relating to such inclusion. Any such proposal will be omitted from or
included in the proxy material at the discretion of the Board of Directors
of the Company, subject to such rules and regulations.
Questions about any of the procedures for shareholder nominations or
proposals should be directed to the Corporate Secretary, Community
Bancorp., P.O. Box 259, Derby, Vermont 05829.
OTHER MATTERS
As of the date of this proxy statement, the Board of Directors knows
of no business that may come before the 2004 annual meeting except as set
forth above. If any other matters should properly come before the meeting,
it is expected that proxies will be voted on such matters in accordance
with the recommendations of management.
22
APPENDIX A
COMMUNITY BANCORP.
AUDIT COMMITTEE CHARTER
I. ORGANIZATION.
This charter governs the operations of the Audit Committee of the
Board of Directors of Community Bancorp. The Committee shall review and
reassess the charter at least annually and obtain the approval of the Board
of Directors. The Committee shall be comprised of at least four Directors
appointed annually by the Board of Directors. All of the members of the
Committee shall be independent of management, Community Bancorp. and any
subsidiary thereof. Generally, members of the Committee shall be considered
independent if they are not officers or employees of Community Bancorp. or
any subsidiary thereof and have no other relationship that may interfere
with the exercise of their independence from management, Community Bancorp.
and any subsidiary thereof. Audit Committee members may not accept any
consulting, advisory, or other compensatory fee from Community Bancorp or
any subsidiary thereof, other than in the members capacity as a member of
the Board of Directors or Board Committee.
II. STATEMENT OF POLICY.
The Audit Committee shall provide assistance to the Board of
Directors in fulfilling its oversight responsibility to the stockholders,
potential stockholders and the investment community relating to corporate
accounting, reporting practices of the Company and its subsidiaries and the
quality and integrity of the financial reports of the Company. In so doing,
the Committee is responsible for maintaining free and open communication
between the committee and independent auditors and the internal auditor and
management of the Company and subsidiaries. In discharging its oversight
role, the Committee is empowered to investigate any matter brought to its
attention with full access to all books, records, facilities, and personnel
of the Company and subsidiaries and the power to retain outside counsel or
other experts for this purpose.
III. MEETINGS.
The Committee shall meet at least four times a year and as many
additional times as the Committee deems necessary. The Committee will meet
in separate executive sessions with the independent auditors at least once
each year and at other times when considered appropriate. The Committee
shall maintain minutes or other records of its meetings and other
activities.
IV. RESPONSIBILITIES AND PROCESSES.
A. General
The primary responsibility of the Audit Committee is to oversee the
Company's financial reporting process on behalf of the Board of
Directors and report the results of its activities to the Board.
Management is responsible for preparing the Company's financial
statements, and the independent auditors are responsible for auditing
those financial statements. The Committee in carrying out its
responsibilities believes its policies and procedures should remain
flexible, in order to best react to changing conditions and
circumstances. The Committee should take the
A-1
appropriate actions to set the overall corporate "tone" for quality
financial reporting, sound business risk practices, and ethical
behavior.
B. Independent Auditors
1. Independence:
The Committee shall have a clear understanding with
management and the independent auditors that the independent
auditors are ultimately accountable to the Board and the
Audit Committee, as representatives of Company's
stockholders. The Committee shall have the sole authority and
responsibility to select, evaluate and, where applicable,
replace the independent auditors. The Committee shall discuss
with the auditors their independence from management of the
Company and shall receive from the auditors, at least
annually, a formal written statement delineating all
relationships between the auditors and the Company consistent
with the Independence Standards Board Standard 1.
2. Compensation:
The Audit Committee is responsible for compensation of any
registered public accounting firm engaged for the purposes of
issuing an audit report or performing other audit, review, or
attest services for the Bank.
3. Audit and Non-Audit Services:
The Audit Committee must pre-approve all allowable audit and
non-audit services provided by the internal auditing firm.
The Audit Committee may delegate this authority to a member
of the committee who will inform the entire committee of any
approved services at the following Audit Committee meeting.
4. Independent Auditor Review and Selection:
At least once every five years, competitive bids shall be
obtained from a minimum of four independent public accounting
firms and, based on an evaluation of those bids and
accompanying proposals, the Committee shall either retain the
current firm or engage a different one. If the same firm is
retained, the lead auditor and reviewing partners must be
rotated every five years.
C. The Internal Auditor
The Company's subsidiary, Community National Bank, employs an
internal auditor. The internal auditor shall report directly to the
audit committee which shall have sole authority to evaluate the
internal auditor, fix her compensation, and replace her if necessary.
The internal audit program must be risk based and include evaluations
of the Bank's significant business activities and their associated
risks.
The internal auditor shall have access to any staff member, bank
records, files or data needed to effectively review any Bank
activity.
A-2
D. Financial Reporting Process
The Committee shall discuss with the internal auditor and the
independent auditors the overall scope and plans for their respective
audits, including the adequacy of staffing. Also, the Committee shall
discuss with management, the internal auditor, and the independent
auditors the adequacy and effectiveness of the accounting and
financial controls. Further, the Committee shall meet separately with
the internal auditor and the independent auditors, with and without
management present, to discuss the results of their examinations.
E. Reports Review
1. The Committee shall review the interim financial statements
with management prior to the filing of the Company's
Quarterly Report on Form 10-Q (or prior to the press release
of results, if possible). Also, the Committee shall discuss
the results of the quarterly review and any other matters
required to be communicated to the Committee by the
independent auditors under generally accepted auditing
standards. The chair of the Committee may represent the
entire Committee for the purposes of this review.
2. The Committee shall review with management and the
independent auditors the financial statements to be included
in the Company's Annual Report on Form 10-K, including their
judgment about the quality, not just acceptability, of
accounting principles, the reasonableness of significant
judgments, and the clarity of the disclosures in the
financial statements. Also, the Committee shall discuss the
results of the annual audit and any other matters required to
be communicated to the Committee by the independent auditors
under generally accepted auditing standards.
3. If deemed appropriate after review and discussion, the
Committee will recommend to the Board that the financial
statements be included in the Company's Annual Report on Form
10-K.
F. Proxy Statement Report
The Committee shall prepare the committee report required by the
rules of the Securities and Exchange Commission to be included in the
Company's annual proxy statement. This charter will be included as an
appendix to the proxy statement at least once every three years.
G. Complaint Procedures
The Audit Committee will establish procedures for the receipt,
retention, and treatment of complaints regarding accounting, internal
accounting controls or auditing matters, including procedures for the
confidential anonymous submission by employees of concerns regarding
questionable accounting or auditing matters.
A-3
PROXY COMMUNITY BANCORP.
Proxy for Annual Meeting of Shareholders
May 4, 2004
The undersigned hereby appoints Leonard Lippens and Joseph Queenin, and
each of them individually, as his or her lawful agents and proxies with
full power of substitution in each, to vote all of the common stock of
Community Bancorp. that the undersigned is (are) entitled to vote at the
Annual Meeting of Shareholders to be held at the Elks Club, Derby, Vermont,
on Tuesday, May 4, 2004 at 5:30 p.m. and at any adjournment thereof.
1. ELECTION OF FOUR DIRECTORS (Class expiring in 2007)
[ ] FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY to vote
(except as marked to the for all nominees listed
contrary) below
To serve until the Annual Meeting in 2007: MICHAEL H. DUNN, MARCEL M. LOCKE,
STEPHEN P. MARSH and DALE R. WELLS.
(INSTRUCTION: To withhold authority to vote for any individual nominee
while voting in favor of the others, strike a line through the nominee's
name in the list above.)
2. TO RATIFY THE SELECTION OF THE INDEPENDENT PUBLIC ACCOUNTING FIRM OF
BERRY, DUNN, MCNEIL & PARKER AS THE COMPANY'S EXTERNAL AUDITORS FOR
THE FISCAL YEAR ENDING DECEMBER 31, 2004.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(continued and to be signed on other side)
In their discretion, the persons named above are authorized to act upon
such other business as may properly come before the meeting or any
adjournment thereof. If any such business is presented, it is the intention
of the proxies to vote the shares represented hereby in accordance with the
recommendations of management.
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholders. If this Proxy is properly executed
but no direction is made, this Proxy will be voted FOR Items 1 and 2.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE
REVOKED AT ANY TIME BEFORE IT IS EXERCISED.
Dated: _______________________, 2004
____________________________________
Signature(s) of Shareholder(s)
____________________________________
Signature(s) of Shareholder(s)
Please sign exactly as name is
printed on this proxy. When signing
as attorney, executor,
administrator, trustee, guardian,
officer, or in any other
representative capacity, please so
indicate. All joint owners should
sign.
NOT A PROXY COMMUNITY BANCORP.
ANNUAL MEETING OF SHAREHOLDERS
May 4, 2004
DINNER RESERVATION
Immediately following the Annual Meeting to be held at the Elks Club in
Derby, Vermont, on Tuesday, May 4, 2004, at 5:30 p.m., a dinner will be
served for all registered shareholders. Please indicate below whether you
plan to attend the dinner.
I/We ____ will ____ will not attend the dinner. If stock is held jointly,
indicate the number attending the dinner. [ ] One [ ] Two
If you are voting by proxy, please complete and return this card, along
with your fully-executed proxy card, in the enclosed postage paid envelope.
You should also complete and return this dinner reservation card in the
enclosed postage paid envelope even if you plan to vote your shares in
person rather than by proxy.
Dated: _______________________, 2004
____________________________________
Signature
____________________________________
Signature